Life Insurance

SYBBI Submitted to Mrs Celsa

Group Members
Sr.No Name Roll no. Marks

1.

Royston Carvalho

2.

Alton Lobo

17

3.

Shriyesh Nair

22

4.

Olav DSouza

33

5.

Prithviraj Rathod

38

6.

Avinash Crasto

41

Index
Sr.no Topic Page No.

1.

Acknowledgement

1. 2.

Introduction History of Life Insurance

4 5

3.

Features of Life Insurance

4.

Benefits of Life Insurance

11

5.

Types of Life Insurance

13

6. 7. 8.

Process of Taking Life Insurance Conclusion References

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Acknowledgement
We take this opportunity to express my profound gratitude and deep regards to our guide Mrs Celsa for her exemplary guidance, monitoring and constant encouragement throughout the course of this Project. The blessing, help and guidance given by him time to time shall carry me a long way in the journey of life on which I am about to embark. We are obliged to our classmates of SYBBI, for the valuable information provided by them in their respective fields. I am grateful for their cooperation during the period of our assignment. Lastly, We thank almighty, Our parents, brother, sisters and friends for their constant encouragement without which this project would not be possible.

Introduction
Definition of 'Life Insurance'
A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

Meaning of 'Life Insurance

The goal of life insurance is to provide a measure of financial security for your family after you die. So, before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as day-care, mortgage payments and college? It is prudent to re-evaluate your life insurance policies annually or when you experience a major life event like marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business. A contract that is made between the insurer and the insuree is called as Insurance. The insurer refers to the insurance company and the insuree is the insured person. The exact meaning of life insurance policy is safeguarding during financial crisis. Life insurance policy is something that will safeguard your family in case of any financial hassles. Life insurance policy is generally made for the benefit of your family as a whole and not on individual basis. In most cases, the payment is made at the time of your death, but certain policies allow you to take a portion of the death benefit if you are terminally ill and need the money to pay for healthcare. You may select either term or permanent insurance. With a term policy, you are insured for a specific period of time. When the term ends, you must renew the policy for another term or change your coverage. Otherwise, you're no longer insured. With a permanent policy, you can buy coverage for your lifetime. You pay an annual premium, typically billed monthly or quarterly, for the coverage. The insurer sets the cost, based on your age, health, lifestyle, and other factors. With a permanent policy, your premium is fixed, but with a term policy it typically increases when you renew your coverage to reflect the fact that you're older.

History of Life Insurance

Risk protection has been a primary goal of humans and institutions throughout history. Protecting against risk is what insurance is all about.

China
Over 5000 years ago, in China, insurance was seen as a preventative measure against piracy on the sea. Piracy, in fact, was so prevalent, that as a way of spreading the risk, a number of ships would carry a portion of another ship's cargo so that if one ship was captured, the entire shipment would not be lost.

Rome
In another part of the world, nearly 4,500 years ago, in the ancient land of Babylonia, traders used to bear risk of the caravan trade by giving loans that had to be later repaid with interest when the goods arrived safely. In 2100 BC, the Code of Hammurabi granted legal status to the practice. It formalized concepts of bottomry referring to vessel bottoms and respondentia referring to cargo. These provided the underpinning for marine insurance contracts. Such contracts contained three elements: a loan on the vessel, cargo, or freight; an interest rate; and a surcharge to cover the possibility of loss. In effect, ship owners were the insured and lenders were the underwriters. Life insurance came about a little later in ancient Rome, where burial clubs were formed to cover the funeral expenses of its members, as well as help survivors monetarily. With Rome's fall, around 450 A.D., most of the concepts of insurance were abandoned, but aspects of it did continue through the Middle Ages, particularly with merchant and artisan guilds. These provided forms of member insurance covering risks like fire, flood, theft, disability, death, and even imprisonment. During the feudal period, early forms of insurance ebbed with the decline of travel and long-distance trade. But during the 14th to 16th centuries, transportation, commerce, and insurance would again re-emerge.

India
Insurance in India can be traced back to the Vedas. For instance, yogakshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practiced by the Aryans. And similar to ancient Rome, burial societies were formed in the Buddhist period to help families build houses, and to protect widows and children.
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Modern Insurance
Illegal almost everywhere else in Europe, life insurance in England was vigorously promoted in the three decades following the Glorious Revolution of 1688. The type of insurance we see today owes its roots to 17th century England. Lloyd's of London, or as they were known then, Lloyd's Coffee House, was the location where merchants, ship owners and underwriters met to discuss and transact business deals. While serving as a means of risk-avoidance, life insurance also appealed strongly to the gambling instincts of England's burgeoning middle class. Gambling was so rampant, in fact, that when newspapers published names of prominent people who were seriously ill, bets were placed at Lloyds on their anticipated dates of death. Reacting against such practices, 79 merchant underwriters broke away in 1769 and two years later formed a New Lloyds Coffee House that became known as the real Lloyds. Making wagers on people's deaths ceased in 1774 when parliament forbade the practice.

Insurance moves to America

The U.S. insurance industry was built on the British model. The year 1735 saw the birth of the first insurance company in the American colonies in Charleston, SC. The Presbyterian Synod of Philadelphia in 1759, sponsored the first life insurance corporation in America for the benefit of ministers and their dependents. And the first life insurance policy for the general public in the United States was issued, in Philadelphia, on May 22, 1761. But it wasn't until 80 years later (after 1840), that life insurance really took off in a big way. The key to its success was reducing the opposition from religious groups. In 1835, the infamous New York fire drew people's attention to the need to provide for sudden and large losses. Two years later, Massachusetts became the first state to require companies by law to maintain such reserves. The great Chicago fire of 1871 further emphasized how fires can cause huge losses in densely populated modern cities. The practice of reinsurance, wherein the risks are spread among several companies, was devised specifically for such situations. With the creation of the automobile, public liability insurance, which first made its appearance in the 1880s, gained importance and acceptance. More advancements were made to insurance during the process of industrialization. In 1897, the British government passed the Workmen's Compensation Act, which made it mandatory for a company to insure its employees against industrial accidents.
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During the 19th century, many societies were founded to insure the life and health of their members, while fraternal orders provided low-cost, membersonly insurance. Even today, such fraternal orders continue to provide insurance coverage to members as do most labour organizations. Many employers sponsor group insurance policies for their employees, providing not just life insurance, but sickness and accident benefits and old-age pensions. Employees contribute a certain percentage of the premium for these policies.

Features of Life Insurance

1. Sharing of Risk
Insurance is a device to share the financial losses which might befall on an individual or his family on the happening of a specified event. The event may be death of a bread-winner to the family in the case of life insurance, marineperils in marine insurance, fire in fire insurance and other certain events in general insurance, e.g., theft in burglary insurance, accident in motor insurance, etc. The loss arising nom these events if insured are shared by all the insured in the form of premium.

2. Co-operative Device
The most important feature of every insurance plan is the co-operation of large number of persons who, in effect, agree to share the financial loss arising due to a particular risk which is insured. Such a group of persons may be brought together voluntarily or through publicity or through solicitation of the agents. An insurer would be unable to compensate all the losses from his own capital. So, by insuring or underwriting a large number of persons, he is able to pay the amount of loss. Like all cooperative devices, there is no compulsion here on anybody to purchase the insurance policy.

3. Value of Risk
The risk is evaluated before insuring to charge the amount of share of an insured, herein called, consideration or premium. There are several methods of evaluation of risks. If there is expectation of more loss, higher premium may be charged. So, the probability of loss is calculated at the time of insurance.

4. Payment at Contingency
The payment is made at a certain contingency insured. If the contingency occurs, payment is made. Since the life insurance contract is a contract of certainty, because the contingency, the death or the expiry of term, will certainly occur, the payment is certain. In other insurance contracts, the contingency is the fire or the marine perils etc., may or may not occur. So, if the contingency occurs, payment is made, otherwise no amount is given to the policy-holder. Similarly, in certain types of life policies, payment is not certain due to uncertainty of a particular contingency within a particular period. For example, in term-insurance then, payment is made only when death of the assured occurs within the specified term, may be one or two years. Similarly, in Pure
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Endowment payment is made only at the survival of the insured at the expiry of the period.

5. Amount of Payment
The amount of payment depends upon the value of loss occurred due to the particular insured risk provided insurance is there up to that amount. In life insurance, the purpose is not to make good the financial loss suffered. The insurer promises to pay a fixed sum on the happening of an event. If the event or the contingency takes place, the payment does fall due if the policy is valid and in force at the time of the event, like property insurance, the dependents will not be required to prove the occurring of loss and the amount of loss. It is immaterial in life insurance what was the amount of loss at the time of contingency. But in the property and general insurances, the amount of loss as well as the happening of loss, are required to be proved.

6. Large Number of Insured Persons

To spread the loss immediately, smoothly and cheaply, large number of persons should be insured. The co-operation of a small number of persons may also be insurance but it will be limited to smaller area. The cost of insurance to each member may be higher. So, it may be unmarketable. Therefore, to make the insurance cheaper, it is essential to insure large number of persons or property because the lesser would be cost of insurance and so, the lower would be premium. In past years, tariff associations or mutual fire insurance associations were found to share the loss at cheaper rate. In order to function successfully, the insurance should be joined by a large number of persons.

7. Insurance is not a gambling

The insurance serves indirectly to increase the productivity of the community by eliminating worry and increasing initiative. The uncertainty is changed into certainty by insuring property and life because the insurer promises to pay a definite sum at damage or death. From a family and business point of view all lives possess an economic value which may at any time be snuffed out by death, and it is as reasonable to ensure against the loss of this value as it is to protect oneself against the loss of property. In the absence of insurance, the property owners could at best practice only some form of self-insurance, which may not give him absolute certainty.

Similarly, in absence of life insurance, saving requires time; but death may occur at any time and the property, and family may remain unprotected. Thus, the family is protected against losses on death and damage with the help of insurance. From the company's point of view, the life insurance is essentially nonspeculative; in fact, no other business operates with greater certainties. From the insured point of view, too, insurance is also the antithesis of gambling. Nothing is more uncertain than life and life insurance offers the only sure method of changing that uncertainty into certainty. Failure of insurance amounts gambling because the uncertainty of loss is always looming. In fact, the insurance is just the opposite of gambling. In gambling, by bidding the person exposes himself to risk of losing, in the insurance; the insured is always opposed to risk, and will suffer loss if he is not insured. By getting insured his life and property, he protects himself against the risk of loss. In fact, if he does not get his property or life insured he is gambling with his life on property.

8. Insurance is not Charity:

Charity is given without consideration but insurance is not possible without premium. It provides security and safety to an individual and to the society although it is a kind of business because in consideration of premium it guarantees the payment of loss. It is a profession because it provides adequate sources at the time of disasters only by charging a nominal premium for the service.

9. Accelerated death benefit

This feature allows you to receive cash advances against the death benefit of your policy if you're diagnosed with a terminal illness. Many people with this benefit use the money to help pay for treatment and other expenses when they have only a short time to live.

10. Cash withdrawals and loans

Many universal and whole life policies allow you to withdraw or borrow money, using the cash value of the policy as collateral. Interest rates tend to be relatively low. You can also use the cash value of your life policy to pay your premiums if you need or want to stop paying premiums for a period of time. You must pay back the loan or your beneficiaries will receive a reduced death benefit.

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Benefits of Life Insurance

Risk Cover
Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.

Planning for life stage needs

Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity Values.

Protection against rising health expenses

Life Insurers through riders or stand-alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.

Builds the habit of thrift

Life Insurance is a long-term contract whereas policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages.

Safe and profitable long-term investment

Life Insurance is a highly regulated sector. IRDA, the regulatory body, through various rules and regulations ensures that the safety of the policyholder's money is the primary responsibility of all stakeholders. Life Insurance being a longterm savings instrument, also ensures that the life insurers focus on returns over a long-term and do not take risky investment decisions for short term gains.

Assured income through annuities

Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.

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Protection plus savings over a long term

Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.

Growth through dividends

Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends/bonus.

Facility of loans without affecting the policy benefits

Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought.

Tax Benefits
Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans.

Mortgage Redemption
Insurance acts as an effective tool to cover mortgages and loans taken by the policyholders so that, in case of any unforeseen event, the burden of repayment does not fall on the bereaved family.

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Types of Life Insurance

As we know that Life Insurance is important for everyone to protect their family in case of their demise the insured money will save their family for educating their children and marriage of daughter, etc. According to your needs, one can choose their Life Insurance Scheme.

Term Insurance Policy

This policy is pure risk cover with the insured amount will be paid only if the policy hold dies in the period of policy time. The intention of this policy is to protect the policy holders family in case of death. For example, a person who takes term policy of Rs.500000 for 20 years, if he dies before 20 years then his family will get the insured amount. If he survive after 20 years then he will not get any amount from the insurance company. It is the reason why term policies are very low cost. So, this type of policy is not suitable for savings or investment.

Whole Life Policy

As the name itself says, the policy holder has to pay the premium for whole life till his death. This policy doesnt address any other needs of the policy holder. Because of these reasons this kind of policy is not very popular or insurance company not suggesting to take this policy.

Endowment Policy
It is the most popular Life Insurance Plans among other types of policies. This policy combines risk cover with the savings and investment. If the policy holder dies during the policy time, he will get the assured amount. Even if he survives he will receive the assured amount. The advantage of this policy is if the policy holder survives after the completion of policy tenure, he receives assured amount plus additional benefits like Bonus, etc. from the insurance company. In this kind of policy, policy holder receives huge amount while completing the tenure. In addition to the basic policy, insurers offer various benefits such as double endowment and marriage/ education endowment plans. The cost of such a policy is slightly higher but worth its value.

Money Back Policy

Money Back Policy is to provide money on the occasions when the policy holder needs for his personal life. The occasions may be marriage, education, etc. Money will be paid back to the policy holder with the specified duration. If the policy holder dies before the policy term, the sum assured will be given to

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his family. A portion of the sum assured is payable at regular intervals. On survival the remainder of the sum assured is payable.

With or Without Profit Policy

Under the with profit policy the policyholder is paid the sum assured plus a share in the profits earned by the insurance company every year. In case of without profit policy, the share in the profits is not given but the rate of premium is less in case of without profit policies. LIC gives handsome bonus to its policyholders by way of profits.

Joint Life Policy

This Policy is taken on the life of two persons. The amount becomes payable to the survivor after the death of the other party. Such policy can be taken for any amount. It is useful for both partners and gives them safety and security. Joint life policy is suitable when both partners are employed and have the capacity to pay premium regularly.

Double Accident Policy

This policy gives special protection in case of death of a policyholder due to accident. In this case if the insured expires by accident, the survivor gets double amount of the policy. In case of such policies the premium rate is higher but the extent of protection against risk is also more. People who travel extensively may prefer this policy.

Annuity Policy
Under this policy the amount of policy is paid in the form of annuities for a specified number of years or till the death of the assured. It is like pension payment arrangement through life insurance. Such policy is useful to those who prefer regular income in their old age. They are relieved from botheration of keeping money safely.

Group Insurance Policy

Group insurance policy can be taken on the lives of the members of a family or of the employees of a business concern. Joint stock companies prefer such type of policies for their employees. The companies pay premium .If any insured employee dies while in service, the insured amount becomes payable to the relatives of the employees.

Convertible Whole Life Policy

In the beginning, a whole life policy is taken but a provision is made in the policy itself to convert the same into an endowment policy after a fixed period. The period is usually 5 years.
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For a while life policy the rate of premium is much less but it increases when it is converted into an endowment policy. This policy is beneficial to newly employed people as in the beginning they can take a whole life policy as their salary is less. Later on when the salary increases the policy can be converted into endowment policy

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Process of Taking Life Insurance Process

Choose company that suits you
The first step in buying Term insurance is to shortlist the company from where you wish to buy the product. There are many companies in India selling life insurance and almost all of them have a Term cover available. Let us call them companies A to M. If you do not TRUST say five of those companies or you do not believe that you wish to deal with them, you need not even look at them. Why you dont like Term Insurance and why you are wrong !

Inquire about insurance cost

Now let us say you like to deal only with A, D, F, G and H. Visit these companies websites and find out how much a term insurance for you costs. If you are 35 look for a policy that will protect YOUR INCOME till the age of say 55 years (choosing age 65 will increase the premium) if your retirement age is 55. However, if you think you will be earning till the age of 65 years, choose a 30-year plan.

Formalities to fulfill
If you are savvy and patient enough, you could fill up the form online and a person will get in touch for the formalities. Or you could call up and ask for an agent. On an average the agent will not be very well qualified but most of them will try to dissuade you from buying a term insurance. Just say, give me a term insurance form. There will be other documentation like income proof (3 years IT return), one photograph, pan card etc.

Filling the form

Next is the process of filling the form. This is one crucial thing that people are normally too lazy to do so they delegate it to the agent. The life insurance form, the medical insurance form and the form when you are landing in the US or Israel should always be filled by you personally! You know about embarkation yourself not the agent whom you have just met. Many of them are worried that you will not be eligible to be insured. So in order to protect their commission (and to please you) will take short cuts, be careful.

Fill details accurately

Every word, every column in the life insurance form is crucial that is the reason why they are there in the form. All details should be accurately filled. Make sure that the name in your passport, pan card and the life insurance form are EXACTLY the same. To the authorities K Balakrishnan is not the same as

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Balakrishnan Kumar. It may sound trivial, but let me assure you your nominee will not find it amusing. Besides, check your height, weight (I have seen some agents argue with the doctor to show a few kilograms less and some doctors oblige!), number of cigarettes you smoke, the amount of alcohol you drink, parents illnesses before they were 65, and also your own medical history.

Faith binds customer, insurer

Let us start from the very beginning. The Life insurance form that you are filling in is called a Proposal form which means you are proposing that you want a life insurance cover. Life insurance business is based on utmost good faith. The Latin word for utmost good faith is Uberrimae Fidei which means you (the applicant) is under a basic duty to disclose all material facts and surrounding circumstances that could influence the decision of the other party (the insurance company) to enter the agreement. Non-disclosure or a partialdisclosure makes such agreements voidable the insurance company can choose to ignore it, but they have a right to cancel the contract. As per the contract, you are proposing and giving all your details that are asked for in the form. This includes your age, height, weight, your smoking and alcohol consumption habits.

Be Truthful
You should be truthful because of two reasons one it is necessary to be truthful. The second perhaps the more important reason is when you are not truthful and you were to die, your nominee will not get any money. If a person has taken a policy just say 8 months before the claim happens, there is almost a 100 per cent chance that the claim will be investigated. Here the company literally looks at the application with a fine comb and anything that has not been correctly stated will be used against the claimant. If for example, a person dies in a road accident and what has been hidden was say blood pressure Insurance companies have said his blood pressure may have caused him some inconvenience while crossing the road

Think about your nominee

One very important thing which most life insurance buyers forget is that by lying on the proposal form they are telling a lie to their nominee, not to the life insurance company! If on death the claim amount is not paid (IMMEDIATELY), it is almost like the policy did not exist.

Cross-check copy of application form

Apart from the critical questions, there are some other questions like caste, spouses name, spouses occupation and childrens names, especially if the nominee is more than one person. When the company issues a policy, they are
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bound to send you a copy of the application form please check whether it is the same form which you had filled. A while ago I heard of a case where the agent had changed the form and removed the illness clauses before submitting the application to the company. As the case involved an employee of the company the critical illness claim was paid without a murmur. What helped was the fact that the client had kept a copy of the application!

Take your time

Please remember even if you are paying a small premium (term premiums are not large), the sum assured is normally a critical amount and your dependents are waiting for that cheque to carry on their lives. It is quite all right for a person to spend some more time while taking a policy but any delay at the time of claim settlement is bound to unnerve the dependents. Everything that you say in the form your job, income, past illnesses are all critical to the whole process of underwriting of your policy. The life insurance company also collects data if it finds that a certain occupation is prone to a particular type of illness, they may ask you to go through some more tests before they issue a policy.

Understand the contract

There is a big difference between a mutual fund investment and a lifeinsurance contract. In case of a mutual fund, the asset management company is making an Offer to you. This means if you issue a valid cheque, units will be allotted to you. They are making the offer, and you are accepting. In case of an insurance contract, you are Proposing saying that you want life insurance. If your cheque goes through, then the life insurance company calls you for a financial and a medical underwriting process. If they are satisfied that your life is a normal life, they will issue you a policy. Once a policy is issued by the company it means you have a contract that is binding. On you the liability is to pay the premium regularly, and on them is a duty that in case of death, they should pay the sum assured amount to the nominee. This is critical and a very important contract which you should understand reasonably well.

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Conclusion
We hereby conclude that the observation and finding of the Life Insurance gave us knowledge about the History of Life Insurance, Features of Life Insurance, Benefits of Life Insurance, Types of Life Insurance policies and Process of Life Insurance.

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References
Webliography
http://www.lifeinscouncil.org/consumers/advantages-of-insurance http://www.investopedia.com/terms/l/lifeinsurance.asp#axzz2JotUm5xw http://www.financial-shopper-network.com/life_insurance_center.htm http://www.prnewswire.com/news-releases/10-commonly-overlooked-featuresof-life-insurance-policies-134032523.html http://www.preservearticles.com/2012040529917/8-important-characteristicsof-insurance.html http://en.wikipedia.org/wiki/List_of_insurance_companies_in_India http://www.jagoinvestor.com/2010/10/step-by-step-process-of-buying-lifeinsurance-2.html http://www.dialabank.com/article.cfm/articleid/4898/meaning-life-insurance http://financial-dictionary.thefreedictionary.com/Life+Insurance

Bibliography
Innovations in Banking and Insurance Romeo S. Mascarenhas.

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